Half of the top 10 richest people in Singapore are heavily vested in the property market. In land-scarce Singapore and expensive property prices, many dream of having the pockets to invest in this evergreen investment. However, with public housing reaching over $1 million dollars, investing in this market is definitely not for those with shallow pockets.
But other than simply buying an investment property and going the route of renting it out for a monthly income, is there a way for investors to take exposure to this investment without laying out $200,000 a pop for the downpayment?
The simple answer is, yes there is.
Real Estate Investment Trusts, also known as REITs, are collective investment schemes that invest in a portfolio of income-generating real estate assets. They are managed professionally and the revenues generated from these assets are required to be distributed to investors. This is also a reason why REITs are popular with investors as they provide regular dividend income.
REITs trade pretty much like shares – investors can buy units of them and they are listed on the Singapore Exchange. Differents REITs may be vested in different types of real estate, for instance, retail, industrial properties, hospitality, offices or residential. This is a great way for you to invest in a certain sector of real estate without having to put out a large amount of cash to buy a physical property.
A word of caution though, because REITs are investment products that are tied to the real estate industry, changes in regulations can impact sentiments regarding their investment value.
An ETF, or exchange traded fund, is a security that tracks an index, a commodity, or a basket of assets like an index fund. Similar to a REIT, ETFs are also traded like a stock on a stock exchange. An ETF can give you the diversification you need if you do not want to be heavily-invested in a certain real estate sector. While the Singapore Exchange(SGX) does not offer yet a REIT ETF, it is working on one and is looking to launch in sometime later this year. The ETF will track the performance of the SGX S-Reit 20 Index launched, which measures the performance of the 20 largest and most tradable S-REITs listed on the local bourse.
Those who are interested in gaining exposure to real estate investments overseas can also buy REITs ETF that are listed in other countries. For instance, the Vanguard REIT ETF presents a diversified exposure to US real estate, or you can also choose an ETF that represents a certain country, region or sector that you are interested in.
Real Estate Crowdfunding
Crowdfunding has been a buzzword for the last two years and guess what, it’s coming to the real estate industry! Basically, these are platforms created to bring investors together to help fund projects by mostly boutique developers. For those who have been thinking of buying a property overseas, this could be a way to do it without going through all the regulations and loan headaches you might otherwise get. Depending on the project, some offer investors an interest payment for the investment you put in for that fixed amount of time. Others may offer you a piece of the real estate pie as a shareholder of the building that you have helped fund.
While the idea is no longer new, the industry in Singapore is still in a nascent stage and investors should carry out the necessary due diligence without plunging into them.